Bloomberg News

Bovespa Gains Third Day as Brazil Rate Speculation Lifts Gafisa

October 13, 2011

Oct. 13 (Bloomberg) -- The Bovespa index gained for a third straight day as speculation policy makers will cut Brazil’s benchmark interest rate next week lifted homebuilder Gafisa SA and other companies that depend on domestic demand.

Gafisa advanced the most in more than two years and was the biggest gainer on the index. The MSCI Brazil/Consumer Discretionary Index was the best performer among 10 industry groups. Tim Participacoes SA, the country’s second-largest wireless carrier, rose after Barclays Capital initiated coverage with an “overweight” recommendation.

The Bovespa advanced 1.4 percent to 54,601.07 at the close of trading. It gained 6.6 percent since Oct. 7, the steepest three-day gain in two months. Fifty-two stocks gained on the gauge, while 16 tumbled. The real strengthened 1.5 percent to 1.7485 per U.S. dollar.

“With the policy meeting getting closer, bets that the central bank will cut rates again are increasing,” Renato Bandeira de Mello, head of equity trading at Futura Corretora brokerage, said by phone from Sao Paulo.

Brazil’s central bank will cut the benchmark Selic rate to 11.50 percent from 12 percent at the end of its two-day policy meeting Oct. 19, according to the median estimate among 14 analysts surveyed by Bloomberg. The central bank unexpectedly cut the rate a half percentage point on Aug. 31 on concern a worldwide slump would crimp growth in Latin America’s biggest economy.

Gafisa rose 9 percent to 5.84 reais, the most since Aug. 2009.

China Imports

The Bovespa earlier fell as much as 1 percent after a report showed imports advanced 20.9 percent in China during September, less than the 24.2 percent median estimate of 22 economists surveyed by Bloomberg.

Vale SA, the world’s largest iron-ore producer whose top export market is China, rose 1.8 percent to 40.95 reais after earlier sliding as much as 0.9 percent.

Tim advanced 4.6 percent to 8.6 reais. “The company’s performance has changed significantly in the last two years, with it resuming revenue and subscriber growth and increasing earnings growth,” Barclays analysts including Felipe Pereira wrote in a report dated yesterday.

Brazil’s benchmark equity gauge entered a bear market in July after plunging 20 percent from its 2010 bull-market peak. The measure has since extended that drop to 25 percent and trades at 8.9 times analysts’ earnings estimates, weekly data compiled by Bloomberg show. That compares to a ratio of 9.5 for MSCI Inc.’s gauge of 21 developing nations’ equities.

--Editors: Richard Richtmyer, Brendan Walsh

To contact the reporter on this story: Ney Hayashi in Sao Paulo at ncruz4@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos in New York at papadopoulos@bloomberg.net


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